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The super funds that are likely to be shut down regardless of the election result

March 5th, 2019

Underperforming superannuation funds will face the chop following the election, with Labor and the Coalition pledging to increase the powers of the regulator, the Australian Prudential Regulation Authority (APRA), if they form government.

Shutting down poor performers was put firmly on the agenda recently, when the Productivity Commission said low performers were costing their members about $188,000 through their working lives and recommended they be closed. Following the Report, Treasurer Josh Frydenberg and Shadow Treasurer Chris Bowen both went on the offensive over poor fund performance.

Mr Frydenberg said the industry needs “a culture of compliance and accountability, regulators fit for purpose, and an acknowledgment by the sector that people must be put before profits”.

Mr Bowen, meanwhile, was more direct, saying “regardless of the structure of the fund or the sector that the fund’s in, poor-performing funds should be dealt with”.

Which funds will go?

The question in the minds of members will be “Is my fund going to be closed?”

It’s too early to answer that question definitively, but we can get some clues through what industry participants have been saying recently.

The Productivity Commission (PC) initially called for a list of 10 top-performing funds to be used as options for default funds. However, strong objections from political and industry sources means this is likely to be abandoned in favour of a “member outcomes test” that would see APRA force serial under-performers to close.

Underperformance, the PC said, could mean lagging an industry benchmark performance by 0.5 percentage points.

Martin Fahy, CEO of the Association of Superannuation Funds of Australia (ASFA), said a more reasonable figure would be 1 percentage point.

Ian Fryer from research house Chant West said a reasonable aim would be to see the industry “ending up with say 30 or 40 really good funds”. The PC said as many as 93 out of almost 200 mainly small funds could be forced to close.

Analysis of APRA figures by The New Daily demonstrates the strong performance of the 14 top-ranking funds over five years to June 2018. All bar two are industry funds.

Super funds – the Top Performers Fund type Average 5-year return
Australian Super Industry 9.9%
BussQ Industry 9.5%
Care Super Industry 9.2%
CBUS Industry 10.1%
First Super Industry 9.2%
HESTA Industry 9.1%
HOSTPLUS Industry 10.3%
Intrust super fund Industry 9.5%
My Life MySuper (Catholic Super) Industry 9.4%
Statewide Super Industry 9.4%
Unisuper Industry 10.2%
VIC Independent Schools Industry 9.4%
ANZ Staff Scheme Corporate 9.5%
Goldman Sachs JB Were Corporate 10.9%

First published on www.thenewdaily.com.au and republished with permission from The New Daily. For the full article visit The New Daily website.